The South Australian government has secured access to up to 20 million litres of diesel through a commercial agreement with fuel supplier IOR, using spare capacity at the company’s existing storage facility at Port Bonython in the Upper Spencer Gulf. The state will immediately purchase and store 10 million litres, with an option to expand to 20 million litres, and a refill provision if the reserve is drawn down.
The SA move follows the Western Australian government’s April agreement with Cambridge Gulf to purchase and store 4 million litres of diesel in the Kimberley, with scope to expand to 12 million litres. Two states have now built their own diesel reserves in parallel with the federal Strengthening Australia’s Fuel Resilience Package confirmed in the 13 May budget.
The state-level rationale
The federal package will eventually deliver a 1 billion litre government-controlled Australian Fuel Security Reserve, focused on diesel and jet fuel, with the national Minimum Stockholding Obligation lifting by 10 days for diesel, jet fuel and petrol. The structural elements will take time to stand up. Storage at the scale required doesn’t currently exist, legislation has to be settled, and the procurement pathway will run over months rather than weeks.
The state-level reserves are filling the gap. Both the SA and WA arrangements use existing private sector storage infrastructure rather than building new capacity, which is what makes them deliverable on short timelines. The SA agreement explicitly references avoiding competition with the Commonwealth or other purchasers, suggesting the state-federal coordination is being managed deliberately rather than improvised.
The geographic focus is also worth noting. The Kimberley reserve targets remote WA, where supply chain length is the structural vulnerability. The Port Bonython reserve sits in the Upper Spencer Gulf, near significant primary production, mining, and freight activity in South Australia. Neither is positioned to support metropolitan supply. Both are positioned to support the regional and industrial users who are typically first to feel a supply constraint.
The pattern
Two states with diesel reserves doesn’t yet establish a national trend. But the pattern is worth watching for a few reasons.
The states with the strongest case for their own reserves are those with significant regional, agricultural, mining, or remote community supply exposure. WA and SA are the clearest examples. Queensland, the Northern Territory, and Tasmania have similar geographic vulnerabilities. Victoria and New South Wales have stronger metropolitan supply networks but significant regional exposure of their own.
State governments are responding to constituents who experienced the practical consequences of the supply crisis at the regional level. Service stations running dry, freight operators struggling to plan, primary producers worried about sowing and harvest fuel. The federal package addresses the structural picture. State-level reserves address the political reality that supply confidence has to be rebuilt close to where the impact was felt.
The infrastructure model is also replicable. The SA deal uses underutilised commercial storage capacity at an existing fuel terminal. That’s available in most states where fuel infrastructure has been consolidated over the past decade. The deal structure (state government as anchor customer, commercial operator providing storage, refill provisions if drawn down) could be applied wherever spare terminal capacity exists.
The coordination question
The SA Premier specifically noted the reserve has been arranged in coordination with the Commonwealth to avoid competing for the same fuel. That coordination matters. If multiple state governments and the federal government are all in the market for diesel during a sustained supply pressure, the unintended consequence is price competition between governments that pushes wholesale costs up.
The current arrangement appears to be working. The federal Strategic Reserve powers have secured more than 450 million litres of additional diesel and 100 million litres of jet fuel through the Fuel and Fertiliser Security Facility. State-level reserves are sized at much smaller volumes (4 million litres in WA with scope to expand to 12 million, up to 20 million in SA) and positioned as supplementary rather than competitive.
If the supply situation deteriorates again, the coordination question will become more acute. The mechanism for resolving competing state and federal claims on available supply is one of the things the federal package’s $34.7 million fuel security framework management allocation will need to address.
What’s likely to happen next
If the diesel supply picture continues to improve through the back half of 2026, the state-level reserves will sit as quiet insurance rather than active operational stockpiles. They will be unwound or refreshed over time but won’t materially affect day-to-day supply.
If the supply picture deteriorates again, the state reserves will be tested. Both the SA and WA arrangements include provisions for the fuel to be released into the National Fuel Security Plan framework if supply conditions worsen. That alignment with the federal plan is what stops the state reserves from being purely parochial and gives them a role in a coordinated national response.
For operators, the state-level reserves don’t change near-term supply economics. The volumes are sized as multi-day buffers rather than substantial replacements for the underlying import flow. They are insurance, not substitutes for the underlying supply chain.
The longer-term significance is structural. State governments now hold direct fuel infrastructure positions that didn’t exist six months ago. Whether that turns into a permanent feature of Australian fuel security policy, or fades as the current crisis resolves, will be one of the things to watch through 2026 and into 2027.